Colorado Fiduciary Income Tax Return (Form DR 0105): Executor's Guide

Most Colorado executors know they need to file a final Form 1040 for the decedent. Many don't realize the estate itself may need to file a separate state income tax return — the Colorado Fiduciary Income Tax Return, Form DR 0105 — for income earned during the administration period.

Missing this filing is a genuine risk. If the estate generated any Colorado-source income after the date of death — interest, dividends, rental income from an investment property, proceeds from selling estate assets — the DR 0105 may be required. This is not the same as the decedent's final individual return. It's a separate tax obligation for a separate taxable entity: the estate.

What Makes a Colorado Estate a Taxable Entity

The moment a person dies, the decedent's Social Security Number can no longer be used for post-death income. The estate becomes its own legal and tax entity. The personal representative must obtain an Employer Identification Number (EIN) from the IRS using Form SS-4. That EIN is what financial institutions, the IRS, and the Colorado Department of Revenue use to track the estate's tax obligations.

At the federal level, the estate files Form 1041 (U.S. Income Tax Return for Estates and Trusts) if it generates gross income over $600 during the administration period. At the state level, the estate files Form DR 0105 — the Colorado Fiduciary Income Tax Return — if it has Colorado-source income.

Colorado's flat individual income tax rate currently stands at 4.40%. The estate pays this rate on any taxable income that isn't distributed to beneficiaries. Income that is distributed gets passed through to beneficiaries via Schedule K-1, and they pay tax on it at their own individual rates.

When DR 0105 Is Required

The DR 0105 is required when the estate earns income from Colorado sources during the administration period. Common triggers include:

Interest and dividends. Bank accounts, CDs, brokerage accounts that remain open during probate continue generating income. This income belongs to the estate, not to the decedent.

Rental income. If the decedent owned rental property and the estate continues operating it during probate — collecting rent, paying expenses — that net rental income flows through the estate.

Capital gains from asset sales. If the estate sells real estate, stocks, or other appreciated assets, the capital gain (reduced or eliminated by the step-up in basis) is estate income that may trigger a DR 0105 obligation.

Income in Respect of a Decedent (IRD). Final paychecks, unpaid vacation time, deferred compensation, stock options that vest or pay out after death — these are classified as IRD and are taxable to the estate or the beneficiary who receives them. They do not receive a step-up in basis. This is one of the most commonly misunderstood tax areas in estate administration.

Trust distributions passing through the estate. If the decedent was a beneficiary of a trust that makes distributions during the administration period, those distributions may pass through the estate.

The Filing Deadline and Fiscal Year Election

This is where many executors make an expensive mistake: assuming the estate runs on a calendar year.

A decedent's estate can elect a fiscal year for tax purposes — the fiscal year can end on the last day of any month within 12 months of the date of death. This is not available to individuals, but estates have this flexibility.

Choosing the right fiscal year is a significant tax planning decision. A CPA can advise on this, but the general principle is that a fiscal year ending shortly before the one-year anniversary of death can defer when Schedule K-1 income is reported by beneficiaries, pushing their tax obligation into the following calendar year.

Once you've chosen a fiscal year, the DR 0105 is due by the 15th day of the fourth month following the close of the estate's tax year. So a calendar-year estate (January 1 to December 31) has a DR 0105 due date of April 15. A fiscal-year estate ending October 31 would have a DR 0105 due date of February 15.

An extension is available — filing Form DR 0158-F extends the Colorado filing deadline by six months, matching the federal 1041 extension period. The extension extends the time to file, not the time to pay. If the estate owes Colorado fiduciary tax, the payment is still due by the original deadline.

Estimated Tax Payments: DR 0105EP

If the estate earns significant income during administration — particularly if it's liquidating a large brokerage portfolio or collecting substantial rental income — underpayment penalties become a real risk.

Colorado's underpayment penalty applies when the estate fails to pay at least 70% of the current-year tax liability, or 100% of the prior-year tax liability, through withholding or estimated payments. For estates undergoing large liquidations, CPAs strongly recommend making estimated tax payments using Form DR 0105EP.

Estimated payments are due quarterly: April 15, June 15, September 15, and January 15. Short-duration estates may only need one or two payments before filing the final DR 0105.

How the Step-Up in Basis Reduces DR 0105 Liability

For many Colorado estates, the step-up in basis dramatically reduces or eliminates capital gains tax on the DR 0105.

When a Colorado resident dies owning appreciated assets, those assets generally receive a "step-up" in income tax basis to their fair market value at the date of death. If the estate sells a Denver brokerage portfolio worth $800,000 at death — portfolio the decedent purchased for $200,000 over decades — the estate's cost basis resets to $800,000. Selling promptly generates zero capital gain.

This is why the appraisal and date-of-death valuation matter so much: they establish the stepped-up basis. Without a documented fair market value as of the date of death, the estate can't prove the basis to the IRS or the Colorado DOR, and it risks being taxed on gains it doesn't legally owe.

Colorado is a separate-property state, which means jointly owned assets typically only receive a 50% step-up — the deceased spouse's share gets stepped up, but the surviving spouse's share does not. Couples who previously lived in California, Texas, Arizona, or another community property state may be eligible for a full double step-up under Colorado's adoption of the Uniform Disposition of Community Property Rights at Death Act — worth discussing with a CPA.

Gathering Documents Before You File

The DR 0105 is only as accurate as the records behind it. Collect the estate's EIN confirmation letter, all 1099s issued to the estate (1099-INT, 1099-DIV, 1099-B from brokerage accounts), brokerage statements showing date-of-death valuations, real estate appraisals, bank account statements for the administration period, and records of all estate administrative expenses — attorney fees, court filing fees, CPA fees, publication costs.

Administrative expenses are deductible on the DR 0105, reducing the estate's taxable income. Funeral expenses are deductible on the federal estate tax return (Form 706) if one is filed, but not on the income tax return — the distinction matters.

When You Can Skip the DR 0105

If the estate generates less than $600 in gross income during the entire administration period, no federal Form 1041 is required — and typically no Colorado DR 0105 is required either. This is common for simple estates with only a checking account that earns negligible interest and no other income-producing assets.

For estates using the small estate affidavit process (JDF 999 — applicable for 2026 deaths where personal property is under $88,000 and no real estate is involved), the administration period is extremely short and income generation is unlikely to trigger a filing requirement.

When in doubt, a CPA consultation — even a one-hour session — is worth the cost. An experienced CPA can determine within minutes whether a DR 0105 is required and what the filing strategy should be.

The Colorado Final Tax & Estate Tax Guide includes a complete walkthrough of the DR 0105 filing process, the fiscal year election decision, and a document collection checklist to bring to your CPA — so you don't spend billable hours gathering information the guide already tells you to have ready.

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